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Courts stays required release of tax-evasion site’s customers

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  1. Prior Restraint
Sep. 7, 2007  ·   A group that runs a Web site dedicated to protecting and promoting constitutional rights continues…

Sep. 7, 2007  ·   A group that runs a Web site dedicated to protecting and promoting constitutional rights continues to be restrained from publishing any tax-related materials, but need not release the identities of individuals who have accessed those materials, the U.S. Court of Appeals in Manhattan (2nd Cir.) ruled Aug. 31.

On Aug. 9, the U.S. District Court in Binghamton, N.Y., ordered Robert L. Schulz and his two groups — We the People Foundation for Constitutional Education Inc. and We the People Congress — to stop posting materials by Aug. 30 that suggest Americans do not have to pay federal income taxes. Judge Thomas A. McAvoy of the district court also directed the groups to turn over to the Internal Revenue Service names, Social Security numbers and other identifying information of those who had previously been provided with tax information. But in an emergency order last week, appeals court Judge Peter W. Hall blocked the action.

The district court had previously ruled that the content on Schulz’s site was not protected First Amendment speech because it “incites imminent lawless action” by directing individuals and entities to violate U.S. tax laws. McAvoy cited the 1969 U.S. Supreme Court case Brandenburg v. Ohio, which set forth the standard by which speech may be punished as whether it is “directed to inciting or producing imminent lawless action and is likely to incite or produce such actions.” In that case, the court found that a Ku Klux Klan member’s racist provocations were nonetheless protected by the First Amendment.

The government had sued Schulz and the Foundation under federal income tax laws alleging their activity resulted in creating abusive tax shelters. Schulz moved to dismiss the lawsuit, arguing that his speech was protected by the First Amendment, but the government then moved for summary judgment – asking the court to decide the case on the facts without further hearings or briefing. The district court denied Schulz’s motion and granted the government’s motion. The judge acknowledged the prior restraint in his order, but justified it due to violation of the tax laws.

Schulz appealed to the Second Circuit, which has agreed to hear arguments Sept. 18 on his motion to stay the district court’s order and to expedite his appeal. In the meantime, Hall stayed the portion of the order that required the release of identifying information. Schulz had argued the group’s content was protected as political speech and under its right to petition the government for redress. Schulz said his group had asked the government several questions regarding the lawfulness of government activities under the constitution and when it received no response, some members determined they were justified in withholding tax payments as a non-violent response.

Schulz said he removed the information from the Web site prior to the Aug. 30 deadline, he says, because “the order is so broad and vague, we did not want to be held in contempt of court.”

He said he “fully expects” he will prevail in getting the lower court’s order overturned. “Clearly, we are not inciting lawbreaking; there is no element of imminency,” he said.

(U.S. v. Schulz, Binghamton, N.Y.)CZ

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